Silver Price Smash - Why Are Markets Tanking As Fed Cuts Rates?

Summary

In this live stream, Smart Silver Stacker discusses the surprising market sell-off following the Federal Reserve's rate cut, with assets like silver, gold, stocks, and Bitcoin all experiencing declines. The focus is on the technical analysis of silver, predicting a potential further drop due to an ABC correction, and the broader economic issues of rising inflation and national debt. Despite short-term volatility, the commentator views these dips as long-term buying opportunities, advocating for tangible assets like silver as a hedge against inevitable future economic challenges and more monetary stimulus from the Fed.

Takeaways

• 😀 The Federal Reserve cut rates by 25 basis points, yet assets like stocks, gold, silver, and Bitcoin are selling off.
• 😀 Silver’s uptrend, established since February, has been breached by today's selloff, signaling potential downside in the market.
• 😀 Silver's price is testing a crucial support level around $29.65, and if it fails to hold, further declines may occur.
• 😀 The current market behavior suggests the possibility of an ABC correction in silver, with further downside potential before finding a bottom.
• 😀 The Fed's rate cut is paired with a message of concern over inflation, which may slow future rate cuts, leading to market uncertainty.
• 😀 Market expectations indicate minimal future rate cuts, which may contribute to the current selloff across various assets.
• 😀 Despite the rate cut, inflation remains a significant concern for the Fed, with recent CPI readings showing rising inflation (2.4% in September, 2.7% in November).
• 😀 The U.S. government’s growing national debt and rising interest costs are contributing to financial instability, which may force further stimulus from the Fed.
• 😀 A potential market crash, such as the one seen in 2020, could trigger massive stimulus and money printing by the Fed, offering long-term opportunities for commodities like silver.
• 😀 Silver’s volatility presents potential buying opportunities, especially during corrections, and dollar-cost averaging remains a solid strategy for long-term investors.
• 😀 The U.S. national debt, surpassing $36 trillion, is leading to higher interest payments, which are contributing to the strain on federal budgets and the broader economy.

Q & A

Why are markets selling off despite the Federal Reserve cutting rates?

Markets are selling off because the Federal Reserve's rate cut is accompanied by a message signaling that future rate cuts might be slower than previously expected. The Fed's concerns about inflation and its data-dependent approach are contributing to investor uncertainty, causing assets like silver, stocks, and Bitcoin to decline.

What is the significance of the breached upward trend line in silver's chart?

The breach of the upward trend line in silver's chart is significant because it suggests that the silver price could fall further before finding a bottom. This could indicate a deeper correction in the market, as silver had been following a predictable uptrend since February.

What does the potential ABC correction pattern in silver imply for its price?

The ABC correction pattern suggests that silver may continue to fall in three waves. After the first downtrend (A-wave), a small rally (B-wave) might occur before the final, deeper correction (C-wave). This indicates that silver's price could decline further before it finds support and potentially starts to rise again.

Why did the Federal Reserve cut rates despite inflation rising?

The Federal Reserve cut rates to stimulate the economy, as markets were already anticipating a rate cut. Despite rising inflation, the Fed needed to provide support due to economic conditions and the increasing cost of servicing U.S. debt. Without a rate cut, markets could face more significant downturns.

How does the rising cost of U.S. debt influence market behavior?

The rising cost of U.S. debt is contributing to higher interest payments, which strain the federal budget and create uncertainty in financial markets. As interest rates rise, so do the costs of servicing the national debt, which could eventually lead the Federal Reserve to intervene with more stimulus or rate cuts, further impacting market dynamics.

What are the implications of the Federal Reserve’s stance on inflation for the future of silver?

The Federal Reserve's ongoing concerns about inflation, even as it cuts rates, suggest that inflationary pressures will continue. This could drive the demand for tangible assets like silver as a hedge, potentially pushing silver prices higher in the long run, despite short-term volatility.

What role does market psychology play in the silver price decline?

Market psychology is heavily influencing silver's price action. Investors are reacting to the Federal Reserve’s mixed messages about future rate cuts, leading to uncertainty and a general sell-off across various asset classes, including silver. This negative sentiment, combined with concerns about inflation and interest rates, is driving silver prices lower.

How does the current debt crisis affect the likelihood of further Federal Reserve interventions?

The ongoing debt crisis, with the U.S. national debt reaching alarming levels, makes it increasingly likely that the Federal Reserve will intervene with more stimulus, such as rate cuts or monetary easing. As the cost of servicing debt rises, the Fed may be forced to step in to prevent a financial collapse, further influencing markets and asset prices.

What is the potential long-term outlook for silver given the current economic conditions?

Given the rising inflation, increasing national debt, and the potential for continued Federal Reserve intervention, silver is likely to remain a strong hedge against these economic challenges. While the price may experience short-term corrections, the long-term outlook for silver appears positive as inflation and debt concerns persist.

Why is silver considered a good investment during times of economic uncertainty?

Silver is considered a good investment during times of economic uncertainty because it serves as a tangible asset that can protect against inflation and currency devaluation. In periods of high debt and inflation, silver often retains value or appreciates, making it a safe haven for investors looking to hedge against economic instability.